It seems that many companies are now doing “Agile” in some form or another, but do we understand why? Most organizations I have worked with in the past chose to adopt Agile practices for a number of reasons, ranging from faster time to market, increased morale, improving customer satisfaction, or reducing cost. Let’s explore the cost factor since at the end of the day, most business organizations need to sustain some level of financial health in order to survive.
One of the most common questions I get when I have a dialog with the leadership team for a company that is considering adopting Agile: Does Agile development reduce my cost?
The way that this question is phrased makes it difficult to answer, so it’s important to clarify what is being asked. Are we talking about reduction of total project cost, increase in net revenue (which is gross revenue minus cost), average burn rate (monthly or annually), etc.?
If we want to clarify the cost factor for an Agile transformation, we need to know what is most important for the organization from a cost perspective. Some companies are unable or unwilling to make a big upfront investment, but are okay with longer-term, sustained approach. Some companies will not change their processes unless they fully understand the financial benefits. So, you will most likely need to dig deeper to get to the bottom of what is the most important concern.
If you want to convince an executive to try Agile, you have to address cost in some way, but it should not be the only factor in your “sales pitch”. Being profitable is critical to most businesses, but adopting Agile practices – if done properly – will often lead to many benefits that will either directly or indirectly improve an organization’s financial health. I chose the word “often” since there are no guarantees of course.
Some of the benefits include:
- Speed to market – Giving the customers a consumable solution more quickly than the competition, even if it’s not the 100% solution; net impact: increase revenue.
- Improved quality – Higher quality reduces rework, which usually translates to lower total project cost; net impact: lower total cost.
- Improved customer satisfaction – Happy customers will likely come back and give you more business in the future; net impact: increase revenue.
- Deliver the right things – Giving the customer what they truly need without the extra fluff not only improves their satisfaction but also reduces cost of building unneeded features; net impact: lower total cost.
As you can see, Agile projects do not guarantee lower cost, but if you implement it effectively, it gives you a greater chance of improving the financial status of your organization either by reducing cost or increasing revenue.
Next time you are asked “Will Agile save me money?”, you will have a few more discussion points to start a productive conversation.